Month: October 2017

The Good

• Asset purchases can often be easier to facilitate than purchasing stock, as buyers are able to avoid having to deal with minority stockholders who refuse to sell.
• There are generally fewer formal statutory requirements involved with facilitating an asset purchase, as opposed to a merger (as discussed further below).
• There is flexibility in being able to pick and choose the specific assets and liabilities you would like to purchase.
• Selling companies remain in existence after the transaction and may continue to operate with the assets kept after the sale.
• Buyers have a lower risk of picking up uncertain or undisclosed liabilities.

The Bad

• Selling all of the individual assets that ultimately make up a business can become very complicated. Each individual asset (i.e., contracts, intellectual property, real estate, etc.) will need to be assigned, retitled, and/or conveyed to the buyer. Furthermore, if certain assets are used for the benefit of multiple business lines, it can be difficult to determine how to allocate such assets in the sale.
• Certain assets may simply not be transferable to the buyer, and the transfer of others may require consents from third parties.

The Good

• Mechanically, stock purchases are usually simpler than asset purchases, as each individual asset does not need to be assigned, retitled, and/or conveyed to the buyer.
• There are generally fewer formal statutory requirements involved with facilitating a stock purchase, as opposed to merger (as discussed further below).
• Buyers can generally obtain assets that would otherwise be non-transferable or would trigger anti-assignment consent requirements from third parties.

The Bad

• Buyers cannot select specific assets and liabilities, as in asset purchases. Buyers will have to assume all of the entity’s assets, rights, and liabilities.
• Purchasing all of the outstanding stock of an entity may be difficult or even impossible, particularly for companies with a large and diverse group of stockholders. For entities with a larger number of stockholders, there is a higher chance of lengthy negotiations, hold outs, and other complications.

The Good

• A merger can often be easier to facilitate than 100% stock purchases, as approval from all stockholders is generally not required. A merger will typically require, however, that at least a majority of stockholders approve a merger.
• Mergers can prevent having to individually assign, retitle, and/or convey each asset, as required in asset purchases.
• Buyers can generally obtain assets that would otherwise be non-transferable or would trigger anti-assignment consent requirements from third parties.

The Bad

•   A merger has many formal statutory requirements (which would generally not be applied to other transaction structures), such as the creation of merger subsidiaries, the preparation and filing of articles or certificates of merger with state agencies, and the preparation of appropriate board and stockholder consents.
• Most states provide that dissenting stockholders are entitled to dissenters’ rights in connection with a merger, which allows such stockholders to petition a court to force buyers to pay such stockholders the fair value for their shares.
• Buyers cannot select specific assets and liabilities to buy, as in asset purchases. Buyers will have to assume all of the entity’s assets, rights, and liabilities.